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Archaeology subsistence payments and tax

Several members report that HMRC are now getting tough regarding staff subsistence payments and tax.

It has been standard in archaeology for overnight payments (commonly £15 per night) to be made to staff without the need to collect receipts, and for these not to be subject to tax and NI.

The dispensation that allowed for this was abolished in April 2016 and a number of our members, during routine HMRC inspections, have been told that in order to continue to pay these allowances, free from tax and NI, organisations will have to implement a rigorous sampling and checking system.

This should involve a review of the receipts retained, and claims made, by a random sample of staff who should not be given prior notice before or during the period that they will be the subject of review. The guidelines for this checking are quite rigorous, as are what can be viewed as valid expenses (not food shopping for instance –even in self-catered accommodation).  The administration required to undertake this sampling is clearly quite onerous, as is the responsibility on the employee to supply valid receipts.

The only way around this would be to treat the overnight allowance as a benefit liable to tax and NI. This either means a reduction in the net sum received by staff (understandably this would be a very unpopular solution), or the need to increase the sum paid to maintain a net benefit of £15 (leading to a considerable uplift to costs and prices).

FAME are advising members to contact their local tax office for advice. Failure to comply might lead to a demand from the Revenue at a future date to the employer for backdated tax and NI to April 2016 on subsistence payments, a sum that could well mount up and is unlikely to be recoverable from customers.

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